LONDON (Reuters) - European fund managers upped their equity holdings to three-month highs in September, favoring the United States where renewed optimism over tax reform is giving fresh impetus to the stock market rally.

Reuters’ monthly poll of 17 money managers in continental Europe was conducted between Sept. 15-27, coinciding with a U.S. Federal Reserve meeting that clearly signaled a rate rise in December and plans to start paring back stimulus.

World stocks are set for their 11th month of gains - matching a similar winning streak in 2003-4 - while Wall Street has marched to record highs. With year-to-date gains of more than 12 percent, the S&P 500 index is heading for its best year since 2013 .SPX.

The equity bull run comes during a clear upswing in world economic growth, alongside the possibility that U.S. President Donald Trump might finally manage to ram through tax cuts that should benefit U.S. companies’ profit margins.

Investors raised equities’ weight in their overall balanced portfolios to 44.1 percent, up 1.5 percent over the month.

But with inflation on the rise and central banks sounding hawkish - the European Central Bank is also expected to start winding down stimulus next year - bond exposure was cut to 40.6 percent, the lowest since June.

U.S. stock holdings meanwhile rose again to 36.8 percent, the highest since June, although allocations are down from January’s 41 percent amid concerns over share prices.

Holdings of euro zone equities were cut, however, falling to 31.9 percent, the lowest since April.

The euro zone market has gained 7 percent so far this year and 3.6 percent in September , with purchasing managers’ surveys indicating robust private business growth and an annualized 2.3 percent economic expansion in the second 2017 quarter.

There are some jitters related to the euro, which has firmed around 12 percent against the dollar this year, heading for its biggest annual gain since 2003 EUR=.

Nadege Dufosse, head of asset allocation at Candriam noted the single currency’s strength.

“We identify two risks. First, the resilience of equity markets to the tightening bias of the Fed and the ECB. In particular, resilience of European equity markets in the context of a stronger euro will be tested,” she said.

Yet despite the euro’s gains, only a third of those who responded to a question on the subject considered it to be over-valued.

Jean Medecin, member of the investment committee at Carmignac, said the euro’s rally largely reflected improving economic growth and receding political risks.

“As endogenous factors have driven the bounce-back of the euro, we are still away from over-valuation territory, especially as the euro is still trading close to its historic average versus the dollar,” he said.

Funds were more evenly split on the timing of a Bank of England interest rate rise - 40 percent of respondents predicted a move this year while 60 percent saw a 2017 hike as unlikely. Governor Mark Carney has said the bank could start raising record-low interest rates in the “relatively near term”.

But Frank Haertel, head of asset allocation at Bank J Safra Sarasin, noted the British economy’s weakness.

“Even if the BoE does hike this year, we do not expect this to be the start of a hiking cycle, but rather a one-off event,” he said.